(Detail from Google Compare home page.)
Speculation that Google might reinforce its U.S. insurance play with an acquisition of CoverHound have been blunted by the California-based aggregator’s announcement that it has received a new round of funding and that Google Compare’s relationship to CoverHound will be one of partnership rather than ownership. Analysts interacting with Google executives have confirmed that Google Compare seeks a more limited role in the U.S. insurance market, not even rising to the level of aggregator.
CoverHound announced on March 9 that it had raised $14 million in Series B financing from existing investors including RRE Ventures, Blumberg Capital and Bullpen Capital, as well as new investors Core Innovation Capital, Thomas Lehrman, Tugboat Ventures, Route 66 Ventures and American Family Ventures, the venture capital arm of American Family Insurance. From among the new investors, Arjan Schütte, managing director, Core Innovation Capital, and Ryan Katz, general partner, Route 66 Ventures, joined CoverHound’s Board of Directors.
(Related: What Will the Launch of Google Compare for U.S. Auto Mean for Insurers?)
The CoverHound announcement said that the new funding will support the aggregator’s carrier growth and integration with large marketing partners, such as Google Compare.
Ellen Carney, Senior Analyst, Forrester Research.
Forrester analyst Ellen Carney, whose writing has sparked debate about Google’s intentions with regard to CoveHound told Insurance Innovation Reporter that Google representatives signaled to her on the night of March 10 that they intended only to partner with rather than to acquire CoverHound. “However, it’s not hard to see that many partnerships turn into acquisitions,” Carney cautions. “In the meantime, [CoverHound has] a nice tranche of investment dollars to grow the business and provide the reach and appointments that Google needs to be a viable distribution choice.”
Google Won’t Be an Insurance Carrier
The news of CoverHound’s partnership relationship with Google Compare, along with statements by Google representatives clarifies Google’s insurance ambitions, at least for the foreseeable future, suggests Kimberly Harris-Ferrante, VP and Distinguished Analyst in Gartner’s insurance industry practice. There has been much speculation about Google becoming an insurance company, but in conversations with Harris-Ferrante, the firm has been clear that its intentions are to leverage its core strengths as a data synthesizer and customer recommendation hub.
“They don’t even want to be an aggregator,” Harris-Ferrante stresses. “They don’t want to own the customer interaction; they don’t want to own any of the conversation—their part will be just around information delivery, and then [the inquiring customer will be] routed to the insurance company of choice.”
Along with its brand value and customer-facing capabilities, Google has been feared by insurers for its vast data gathering and analysis capabilities as they might be used to power competitive underwriting. While such a course cannot be ruled out for the future, the threat Google poses to insurers—or at least to larger ones—is that it enables carriers with a small share of the market to compete with those with a large share, according to Harris-Ferrante.
Google Compare Empowers Smaller Insurers
The insurers that Google announced as carrier partners, including MetLife and Mercury Insurance, are small brands within the auto insurance market. What that partnership does is to give those smaller companies the exposure of a giant brand—Google itself, Harris-Ferrante suggests. “The way this levels the playing field is what should be the threatening part to large insurers,” she says. “Companies who haven’t been able to compete in the digital space are now empowered to do so.”
Google Compare adds two elements beyond traditional aggregation, Harris-Ferrante notes. Whereas aggregators already provide price comparison, Google Compare adds a suitability measure to match customer to insurer, as well as a customer approval score, analogous to Net Promoter Score. “We don’t have a digital platform today that does these two things today,” she says. “I think that’s the really cool thing.”
Not Pay-to-Play
Google Compare also operates differently than standard Google search in a key way, Harris-Ferrante notes. “Whoever pays the most gets to the top of the search engine; well, that’s not what gets you to the top at Google Compare,” Harris-Ferrante says. “It’s not a pay-to-play game.”
Carriers that cannot compete on advertising expenditure and current brand equity can thus gain a market point-of-entry based on the Google brand and can compete on their product and service strengths with much larger companies, Harris-Ferrante stresses. “The threat is not Google as challenger, but what Google does to empower competition,” she comments.
For a general consumer, the quoting process is a mystery — “why does my individual risk profile get so many different prices?”
Most people are completely unaware that a branded carrier actually writes business using a variety of legal entities, or writing companies, in each state. In fact, if a carrier creates a new and better pricing system, they often open it up as “new business only”, so existing customers may never know that they could get a better rate from the same branded carrier unless they specifically ask their agent or threaten to attrit. Pricing transparency and pricing sophistication advisory services via the quoting service will by very pro consumer.
Small carriers may well mean small benefits to consumers. If Google empowers small insurers like Mercury, who by the way, has one of the most restrictive auto policies among California insurers, then it’s reasonable to envision a changed market having more substandard or near substandard coverage to sell.
So could it be more beneficial for consumers to compare policy language/coverage as opposed to comparing quotes and rates through services like GoogleCompare and Comparenow.com?
First, on the discussion re MetLife – I think you credit the general consumer with more interest (or knowledge) of the insurance market than is warrented. MetLife is an insurance company – period. As for big four entering, they will not for a while because Google does not need them and they do not need Google – yet. Google is testing the market, possibly to make sure the driverless car rollout is not limited by the lack of innovation, commonplace in the insurance industry. During testing, activity will be slow and will not drive volumes that would interest bigger insurers. In the UK, Google has been at this for a number of years and has yet to gain any significant market share. In the UK, Google has partnered with 130 of so insurers, in part because aggegators are a major part of the market and Google is the “white knight” offering insurers market access at a cheaper rate and less hidden deals. Aggegrators in personal lines is a natural next step – for the consumer, what is not to like? This is hampered and slowed down by the complex regulatory environment in the US. Agents think they are in the relationship business, but this in most cases is wishful thinking – the same claim was made by travel agents 10 years ago. The majoriy of agents are order takers. and the consumer will not miss them. There will be a need for some agents but what percentage of the personal lines should they manage? I suspect in 5 -7 years, this will be 25-40% so there is a lot of direct business in play.
Ken, yes, of course MetLife’s participation in Google Compare is an attempt to gain market share. I only say that the carrier’s name can work against it because it’s known (unsurprisingly) for life insurance; it is thought of as a life insurer–perhaps in a way that Nationwide might NOT be thought of as a life insurer.
All I’m saying about the Big Four is that on Google Compare they’re no bigger than other companies. As I said, they still have their advertising budgets, etc. But they don’t appear any bigger in this new channel and they can’t buy their way to looking bigger. That goes against the grain of the kind of value Google is trying to provide with its comparison capabilities.
Ken, a couple of responses: MetLife’s brand could work against the company for auto insurance. In any case, the insurer currently has a small share of the auto market.
Couldn’t agree more about the Google brand.
How long before the Big Four auto insurers want in? What does it matter? They probably should, but even after they arrive, they don’t enjoy any special advantage that they don’t already have. In entering Google Compare, they are entering that level playing field. They will continue to have large advertising budgets and the brand equity that can secure. But within Google Compare, they will be like everybody else: they will exist on the same scale. I think that’s the point Kimberly Harris-Ferrante was making.
Anthony, MetLife Auto may currently have a small market share, but I would think that its participation in Google Compare is precisely an attempt to remedy that. I’m not at all sure I understand why its generally-well-known & well-regarded brand “could work against” it here.
As for the Big Four, I think it’s obvious that their participation, if & when it occurs, radically alters the game: Google +small companies/unknown brands = new opportunities for small companies/unknown brands. Google + Big Four Brands + small companies/unknown brands = Yet another platform for Big Four Brands. Brand + Pricing power will always win out in the end against your friendly local insurer.
Three points I think worth raising: (1) While MetLife Auto may well be, for now, a “small brand” within the auto insurance market, MetLife itself is a large, a BIG brand, well known to all who will be investigating the new Google offering.
(2) While “Google Compare adds a suitability measure to match customer to insurer, as well as a customer approval score, analogous to Net Promoter Score “ — each, as your “Distinguished Analyst” notes, a new & good thing, what really matters here is what Google REALLY adds to this offering, namely the Google brand, dare I say it, a BIG brand.
(3) Given MetLife’s big brand & Google’s big brand, how long before the Big Four Auto Insurance brands want in on the Google Compare game? — turning the short-lived “level playing field for small players” into another big brand battleground? — & setting the stage for something well-beyond Google Compare as just another aggregator?